4 min Read Mar 22, 2019
A floating rate bond (or variable rate bond) is a debt instrument whose coupon payment is not fixed but periodically resets based on a reference benchmark interest rate—such as the RBI's repo rate, T-bill yields, or MIBOR—plus a fixed spread. As market interest rates rise, the coupon on floating rate bonds increases accordingly, protecting investors from the loss of value that fixed-rate bonds suffer in a rising rate environment. In India, the government issues Floating Rate Savings Bonds for retail investors, and floating rate debt mutual funds invest in such instruments to offer low duration risk with market-rate-linked returns.
For android only
